Should you opt for EMI Moratorium or Not during COVID-19?
The RBI-proposed three-month EMI moratorium is an excellent initiative
for the financially needy people during the coronavirus pandemic. However, it
is believed that the interest amount for this time frame could likely act as a
financial burden for the borrowers later on. Hence, to help you make the right
decision, here in this article, we will discuss whether applying for the
moratorium is actually the correct thing to do or not.
The on-going COVID-19 pandemic has forced the global economy to enter
into a recession. A developing country like India is also facing the challenge
to stabilize its economy. The majority of the businesses are suffering a massive
amount of losses due to the extended lockdown period. Under such situations, it
has become quite difficult for the borrowers to pay their loan EMIs on time. As
a result, the RBI announced the loan repayment moratorium for three months,
i.e. March, April, and May, to offer relief to several people, especially those
who are suffering from liquidity problems.
You will know more about the effects of the proposed delay on your
outstanding amount using the Moratorium
EMI Calculator in this article. However,
before jumping into the central theme of the article, let’s discuss a few
significant aspects of the RBI’s three-month moratorium.
The RBI Proposed Moratorium in Brief
As per the RBI guidelines, all types of loans, such as personal loans,
home loans, crop loan, business loans, vehicle loans, agricultural term loans,
credit card dues, etc., are eligible for the moratorium. Besides, the delay in the loan repayment will not reflect on the credit report, and the borrowers will
not be subjected to any forms of penalty.
However, those who are opting for EMI moratorium are required to pay the
interest amount applicable for the three months later. As such, the borrowers
who apply for the moratorium need to pay an extra amount in the long
term.
The Options you get when you opt for the moratorium
If you apply for the RBI Moratorium, the borrowers are
likely to get one of the three options from the lenders:
- Borrowers
will get the opportunity to repay their pending interest amount through a
one-time payment.
- The
pending interest will be added to the outstanding amount of the borrowers;
as a result, their EMI loan amount will increase for the remaining months.
- The EMI amount will remain unchanged, but the lender might increase the tenure of the loan.
The Impact of Opting for the Moratorium
Opting for the moratorium will undoubtedly increase your financial
burden in the long term. If you calculate the net effects using a Moratorium EMI Calculator, you will be
surprised to know that it will broadly impact the people who have taken a loan
recently (2-3 years ago). On the other hand, the impact will be significantly
lesser for relatively older loans.
For whom is the moratorium meant for?
The EMI moratorium is an excellent option for those who are facing
financial difficulties during the coronavirus lockdown period. It intends to
help the needy people suffering from lack of financial support. Once the
lockdown period is over, they need to pay their pending loan amount following
the same old payment pattern.
Is it wise to apply for the moratorium?
You need to understand that the RBI Moratorium is not a waiver by any means. The moratorium
means a delay in the EMI repayment; therefore, you will have to pay your dues
at some point in time later. If you opt for the moratorium option, you need to
pay the interest amount for these three months as well.
So, if you have sufficient financial resources at present, it would be
wise to clear your dues without applying for the moratorium. This will help you
avoid any additional spending, and more importantly, the financial burden in
the long term.
Conclusion
If you have pending credit card dues, it is highly recommended to clear
them without further delay. Unlike other kinds of loans, interest on credit
cards is charged at 3%-4% monthly. So, if you skip the repayment for three
months, you will have to pay an additional 10%-12% interest, which is huge.
Besides, you will have to pay the interest on the interest amount as well.
Ultimately, it is entirely your call, and you need to decide according to your
financial stability.
